Drilling permits go unused

FARMINGTON — Thousands of oil and gas permits on public land sit idle, and a conservation group said Wednesday that drillers should use them before clamoring for more.

In the Farmington area, companies hold 492 idle drilling permits on U.S. Bureau of Land Management lands, an agency official said.

Throughout New Mexico, 1,307 permitted operations await work, the second-most in the nation, behind only Wyoming.

Nationwide, 6,573 permits to drill on BLM land have not been developed, The Wilderness Society said in a report released Wednesday. The Wilderness Society is a conservation group based in Washington, D.C.

In the Farmington area, low natural gas prices are causing producers to hold off on developing leases, said Dave Mankiewicz, minerals manager at the BLM Farmington field office.

"Currently, the gas market is pretty bad," he said. "Natural gas prices, they're really driving it, so it is economics."

Companies pay $6,500 for each drilling permit, so it is in their interest to drill whenever it can be done economically, Mankiewicz said. BLM permits expire after four years.

The nearly 500 unused drilling permits locally are "on the high side," Mankiewicz said. "I think people are waiting for the gas prices to improve."

The Wilderness Society said oil and gas companies don't need more help from the federal government.

"We have high levels of production and drilling, while oil and gas companies are holding on to even more leases and permits than they can use," Nada Culver, director of The Wilderness Society's BLM Action Center, said in a prepared statement.

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"Yet this industry continues to push for more of our public lands, more permits and shortcuts or full-on exemptions from environmental laws, as do some in Congress."

Steve Henke, president of the New Mexico Oil and Gas Association, said it's business as usual for companies to hold permits on lands and not immediately drill them. Prices for gas and production gas can cause drillers to reconsider, he said.

"There's always a portfolio of accrued wells waiting to be drilled," he said. "Economics can influence the decision to drill, as well as the discovery prospects. Companies can choose not to drill those permitted wells, or defer them or do something else. That's not terribly unusual."

Jason Sandel, executive vice president of Aztec Well Servicing, said a company holding more permits than it can immediately use is no different from a car dealer keeping an inventory of vehicles.

"You have to gather up a number of permits and see which one works best," he said. "To me, that's the way business is done. I take great objection to the idea that there's some sort of nefarious activity going on just by obtaining a permit."

Many companies are keeping infrastructure in place while waiting for prices to improve. Natural gas was selling for $4.65 per mmBtu Wednesday on the Henry Hub. During the mid-decade boom, natural gas sometimes soared past $10.

As natural gas prices have declined, so has production.

From a high of more than 1 billion cubic feet in Northwest New Mexico each year from 2004-06, gas wells in the region produced only 884 million cubic feet in 2010.

Through April, production continued to fall, tracking 3.4 percent behind 2010's monthly totals.

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